Newark, Calif.-based Risk Management Solutions (RMS), a risk modeling company, has designed the trigger mechanisms and performed the risk analysis for a securitization of multi-peril, multi-event catastrophe risk.
Fremantle Ltd, based in the Cayman Islands, will provide $200 million of collateralized multi-event cover for U.S. earthquake and hurricane risk, Japan earthquake and typhoon risk, and Europe windstorm risk. The securities were issued by Brit Insurance Ltd, a subsidiary of Brit Insurance Holdings PLC, for three years, as part of a program structured and placed by ABN-AMRO.
The catastrophe swap would be triggered for U.S. events if aggregate insurance industry losses as estimated by Property Claims Services (PCS) exceed defined threshold amounts. Japan and Europe events would trigger if specific parametric criteria, such as wind speeds or ground motions, are met or exceeded. RMS designed the triggers and analyzed the probabilities of exceedance in conjunction with structuring work performed by Guy Carpenter & Company Ltd.
The multi-event cover is structured with three classes, each consisting of two event payments. Payments under Class C cover the occurrence of the fourth and fifth triggering events during the risk period; this class is rated “Ba2” by Moody’s and “BB-” by Fitch. Class B covers the sixth and seventh triggering events and is rated “A3” and “BBB+” by Moody’s and Fitch respectively. Class A, rated “Aa1” and “AAA” by Moody’s and Fitch respectively, covers the eighth and ninth triggering events to occur.
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